Premarketing of funds now authorised in France

Frog, the work group that was set up earlier this year by the French asset management association AFG, together with local market regulator AMF, to work on increasing French funds’ competitiveness, has delivered its first conclusions.

Amid leads the group unveiled to boost the local fund industry remain the concept of premarketing of funds, which was hitherto forbidden in France.

The French market regulator, Autorité des Marchés Financiers has adjusted its policy to implement the concept and make it easier to launch new funds in France.

“Prior to a fund’s launch, investment professionals may need to communicate with potential investors in order to gauge a project of product. Until now, certain types of presentations or exchanges with investors may have been considered marketing practices, which would trigger the application of rules poorly suited to this stage of a product’s development.

“Thus, to encourage innovation, make it easier to create new funds in France and give participants legal protection, the AMF is introducing the concept of premarketing,” AMF said.

The regulator added that the practice of asset managers contacting contacting up to a maximum of 50 investors – that includes professionals or individuals whose initial subscription would be at least €100,000 – to assess their interest prior to the launch of a Ucits or Aif fund will not constitute an act of marketing, “provided that the investors are not given a subscription form and/or documentation containing definitive information on the fund’s characteristics.”

But if any subscription from the investors approached is recorded, it will then be considered as a marketing act.

Other situations that would not trigger the application of marketing rules in France include :

  • Participation by a management company in conferences or meetings of professional investors, provided the investors are not asked to invest in a specific product
  • OTC trades between investors
  • The purchase, sale or subscription of units or shares in Ucits or Aifs in the context of a management company’s compensation policy, units or shares in Ucits or Aifs on behalf of the management company’s management team, which manages them, or its senior management, or the management company itself, or  carried interest shares
  • A management company responding to a request for proposal (RFP) by a professional investor that is a legal entity.

AMF also unveiled a few ideas on which Frog worked to boost French funds’ competitiveness.

Frog pushes for the use by investors of direct orders to the main fund order desk, thus foreign investors will not have to open a bank account in France anymore in order to subscribe shares in a France-domiciled fund.

The draft law Sapin 2 that focuses on transparency, anti-corruption and France’s economic modernisation will be amended to introduce such an option.

Another amendment to the draft law will introduce an option for asset managers to freeze assets and stop withdrawals from their funds in the event of a major liquidity shock.

Adrien Paredes-Vanheule
Adrien Paredes-Vanheule is French-Speaking Europe Correspondent for InvestmentEurope, covering France, Belgium, Geneva and Monaco. Prior to joining InvestmentEurope, he spent almost five years writing for various publications in Monaco, primarily as a criminal and financial court reporter. Before that, he worked for newspapers and radio stations in France, in particular in Lyon.

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